Quarterly Report • Mar 7, 2023
Quarterly Report
Open in ViewerOpens in native device viewer
2022
ANNUAL REPORT 2022
| 1. | MANAGEMENT REPORT | 3 |
|---|---|---|
| 2. | STANDALONE FINANCIAL STATEMENTS | 7 |
| 03 QUALIFIED HOLDINGS | 35 | |
| 04 INFORMATION TO BE PRESENTED UNDER THE TERMS OF THE ARTICLE 447 OF THE |
CODE FOR COMMERCIAL SOCIETIES 36
"PHAROL", "Group PHAROL", "Group" and "Company" is a reference to the companies that are part of PHAROL SGPS, S.A. or to one of them, depending on the context.
As at December 31, 2022, PHAROL main assets are composed of (1) 131,151,859 common shares of Oi, S.A. ("Oi"), representing 2,20% (excluding treasury shares held by Oi itself) of the total share capital of Oi, in an amount of 4 million Euros, (2) debt securities of Rio Forte Investments S.A. ("Rio Forte") with a nominal value of 897 million Euros and currently valued at 51.9 million Euros, (3) the investment in the portfolios of shares and bonds in the amount of 9.7 million Euros.
As of December 31, 2014, after the capital increase of Oi, concluded on May 5, 2014 (the "Oi Capital Increase"), PHAROL held a 39.7% direct and indirect stake in Oi. This included a portion classified as a noncurrent asset held for sale, following the Exchange agreement ("Exchange") entered into on September 8, 2014 and completed on March 8, 2015, and the remaining stake of 22.8%, classified as investment in joint ventures and associates, and therefore accounted for using the equity method.
On March 30, 2015, the Exchange was completed, whereby PHAROL (1) transferred to Portugal Telecom International Finance, B.V. ("PT Finance"), a subsidiary of Oi, an aggregate amount of 47,434,872 common shares and 94,869,744 preferred shares of Oi, and (2) received from PT Finance debt securities of Rio Forte, with a nominal value of Euro 897 million and a call option on the transferred shares ("Call Option"). After the completion of the Exchange, PHAROL held an effective stake of 27.48% in Oi corresponding to the 22.8% stake referred above plus 4.7% due to the decrease in the number of outstanding shares of Oi.
The relevant agreements for the implementation of the New Structure of Oi were signed on July 22, 2015. On September 1, 2015, a General Meeting of Shareholders of Oi was held where the New Structure was approved.
As of September 30, 2015, after the implementation of the New Structure, but prior to the voluntary conversion of preferred shares to ordinary shares of Oi, PHAROL held, directly or indirectly through wholly owned subsidiaries, 84,167,978 common shares and 108,016,749 preferred shares of Oi.
As of October 8, 2015, following the voluntary conversion of preferred shares into common shares of Oi, PHAROL now holds, directly and indirectly through wholly owned subsidiaries, 183,662,204 common shares of Oi, representing 27.18% of total share capital of Oi (excluding treasury shares held by Oi itself). PHAROL's voting rights in Oi were limited to 15% of the total common shares of Oi.
With the implementation of the New Structure on July 30, 2015, the shareholders' agreements, through which joint control of Oi was exercised, were terminated. Up to that date, PHAROL accounted for its stake in Oi as an Investment in Joint Ventures. After this date, PHAROL considered it had significant influence over Oi and classifies it as an associate company. As a result, from July 30, 2015 the investment in Oi continued to be accounted for according to the equity method, based on PHAROL's economic stake in Oi's results.
On April 29 and May 19, 2016, PHAROL, due to a corporate reorganization, transferred direct ownership of 128,213,478 common shares issued by Oi S.A., to its 100% owned subsidiary BRATEL B.V.. Due to the Corporate Reorganization, BRATEL B.V. now directly holds (and PHAROL indirectly holds) 183,662,204
common shares of Oi S.A., which represented 22.24% of Oi S.A.'s entire share capital (27.18% excluding treasury shares held by Oi itself).
On 15 September 2017, in order to concentrate all its operations in Luxembourg, PHAROL transferred the ownership of all the shares that BRATEL BV had in Oi SA to its subsidiary BRATEL S.à.r.l., 100% owned by BRATEL B.V.
In December 2017, and after the decision by the Court of the 7th Business Court of Rio de Janeiro (which it handles the Judicial Recovery of Oi) and which decided to withdraw the rights of the members of the Board of Directors of Oi in the approval of the Judicial Recovery Plan, it was understood that PHAROL lost the significant influence it had until then on its associate Oi. Consequently, on 31 December 2017, PHAROL began to measure its investment in Oi at market value and classify it as "Financial Assets".
Oi S.A., in the disclosure of its consolidated results for 2017, announced that it had restated its Consolidated Equity on January 1, 2016 and December 31, 2016, amounting to BRL 18 billion and BRL 19 billion, respectively. Following this restatement, PHAROL's investment in Oi, being recorded under the equity method, was restated and valued at zero in the periods of January 1, 2016 and December 31, 2016.
On July 20, 2018, following the homologation of the Capital Increase through the conversion of debt into shares, Oi's share capital increased from 825,760,902 shares for a total of 2,340,060,505 shares, was a dilution of PHAROL's participation in Oi to less than 8%.
On January 9, 2019, as part of the capital increase due to the Entry of New Resources, Oi went from 2,340,060,505 shares to a total of 5,954,205,001 shares representing its share capital, with a dilution of PHAROL's stake in Oi to less than 4%, even though it partially accompanied the referred capital increase.
On April 2, 2019, with the approval of an agreement between PHAROL and Oi on January 8, 2019, in which Oi committed itself to reimburse PHAROL for the damages for damages suffered through Oi's actions and resources for the acquisition of Oi shares subscribed in the aforementioned capital increase, PHAROL now holds a 5.51% interest in Oi's share capital.
During 2020, PHAROL sold all of Oi's preferred shares and a small portion of common shares, resulting in a final stake of 5.37% in Oi's share capital.
In 2021, after carrying out transactions for the purchase and sale of shares in Oi, PHAROL held a position of 5.38% in Oi (without treasury shares held by Oi itself).
In 2022, PHAROL once again liquidated part of its position in Oi, with a final position of 2.20%.
In 2022, PHAROL's negative results reflect only the costs of the operation during the year, which are mostly costs with personnel and external supplies and services. In terms of Equity, and as a result of the implementation of the Judicial Recovery Plan also impacted by the Brazilian political and economic instability, the value of PHAROL's investment in Oi reduced to 4 million Euros, being responsible for the reduction of Equity PHAROL at 19.66 million Euros. Regarding the credit on Rio Forte, despite some timid advances in the legal proceedings underway in Luxembourg and Portugal, nothing very relevant affected its valuation, reason why it was chosen not to record changes in its value in the 2022.
Net income for 2022 was negative by 2.51 million Euros and essentially reflects operating costs amounting to 2.4 million Euros.
Apart from managing its investments, the Company did not directly conduct any other business activity.
There are no outstanding amounts overdue to the Portuguese State and the Portuguese Social Security System.
The Company did not enter into any material businesses or transactions with the members of its Board of Directors and the Fiscal Council, except for those mentioned in Note 20 to the Financial Statements as at December 31, 2022.
The main events of the year ended December 31, 2022 and recent developments are described in the Consolidated Annual Report of PHAROL.
Considering that in the year ended December 31, 2022 a negative result of Euros 2,509,260 was obtained, the Board of Directors of PHAROL proposes that they be transferred to the Company's Retained Earnings.
Lisbon, March 2, 2023
Luís Maria Viana Palha da Silva, Chairman of the Board of Directors and Managing Director
Ana Cristina Ferreira Dias, Board Member
Avelino Cândido Rodrigues, Board Member
Maria do Rosário Amado Pinto Correia, Board Member
Maria Leonor Martins Ribeiro Modesto, Board Member
Pedro Zañartu Gubert Morais Leitão, Board Member
| 2. STANDALONE FINANCIAL STATEMENTS |
|||
|---|---|---|---|
| PHAROL, SGPS, S.A. | |||
| BALANCE SHEET | |||
| 31 DECEMBER 2022 AND 2021 | |||
| Euro | |||
| Notes | 2022 | 2021 | |
| ASSETS | |||
| Non-Current Assets | |||
| Tangible assets | 39,520 | 83,798 | |
| Financial investments - equity method of accounting | 6 | 6,160,893 | 39,912,489 |
| Other financial assets | 7 | 61,595,686 | 51,906,667 |
| Total non-current assets | 67,796,099 | 91,902,954 | |
| Current Assets | |||
| State and other public entities | 10 | - | 3,506 |
| Other accounts receivable | 158,431 | 138,246 | |
| Deferrals | 1,899 | 2,962 | |
| Cash and bank deposits | 4 | 18,785,014 | 16,551,837 |
| Total current assets | 18,945,344 | 16,696,551 | |
| Total assets | 86,741,443 | 108,599,506 | |
| SHAREHOLDERS' EQUITY | |||
| Share capital | 11 | 26,895,375 | 26,895,375 |
| Treasury shares | 11 | (164,809,193) | (164,809,193) |
| Legal reserve | 11 | 6,773,139 | 6,773,139 |
| Other reserves | 11 | 242,935,715 | 264,283,232 |
| Adjustments to financial assets | 11 | (182,519,562) | (162,814,562) |
| Retained earnings | 11 | 142,963,795 | 123,971,923 |
| Net income Total equity |
(2,509,260) 69,730,008 |
(2,355,645) 91,944,268 |
|
| LIABILITIES | |||
| Non-Current Liabilities | |||
| Loans obtained | 36,593 | 101,826 | |
| Total non-current liabilities | 36,593 | 101,826 | |
| Current Liabilities | |||
| Suppliers | 12 | 118,773 | 54,683 |
| Accrued expenses | 13 | 430,495 | 567,507 |
| State and other public entities | 10 | 123,076 | 136,927 |
| Other accounts payable | 19 | 16,302,498 | 15,794,295 |
| 16,974,842 | 16,553,411 | ||
| Total current liabilities | 17,011,435 | 16,655,237 | |
| Total liabilities Total liabilities and shareholders' equity |
86,741,443 | 108,599,506 |
| PHAROL, SGPS, S.A. | |||
|---|---|---|---|
| INCOME STATEMENT | |||
| FOR THE PERIODS ENDED 31 DECEMBER 2022 AND 2021 | |||
| Euro | |||
| Notes | 2022 | 2021 | |
| Equity in losses/(earnings) of subsidiary companies | 14 | (126,596) | (242,861) |
| Supplies and external services | 15 | (979,444) | (799,118) |
| Wages and salaries Indirect taxes |
16 | (938,178) (119,308) |
(1,335,843) (120,806) |
| Increases/(reductions) in fair value | 17 | (310,426) | - |
| Other income and gains | 49,991 | 241,369 | |
| Other expenses and losses INCOME BEFORE DEPRECIATION AND AMORTISATION, FINANCING EXPENSES AND TAXES |
(16,480) (2,440,441) |
(22,344) (2,279,603) |
|
| Depreciation and amortisation ((expenses)/reversals) | (33,006) | (35,510) | |
| OPERATING INCOME (BEFORE FINANCING EXPENSES AND TAXES) | (2,473,448) | (2,315,113) | |
| FINANCIAL LOSSES AND (GAINS) Interest and related income |
1,923 | - | |
| Interest and related expenses | (3,901) | (10,514) | |
| INCOME BEFORE TAXES | (2,475,426) | (2,325,627) | |
| Income taxes | (33,835) | (30,018) | |
| Net income (loss) from continuing operations | (2,509,260) | (2,355,645) | |
| Earnings per share | |||
| Basic and Diluted | 18 | - | - |
| The accompanying notes form an integral part of these financial statements. | |||
| PHAROL, SGPS, S.A. | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | |||||||||
| PERIODS ENDED 31 DECEMBER 2022 AND 2021 | |||||||||
| Euro | |||||||||
| Share | Treasury | Other | Adjustments to | Retained | Net | Total shareholders' | |||
| capital | shares Legal |
reserve | reserves | financial assets | earnings | income | equity | ||
| (184,873,844) | 6,773,139 | 264,283,232 | (92,122,395) | 158,735,395 | (14,316,500) | 165,374,402 | |||
| Balance as at 31 December 2020 | A | 26,895,375 | |||||||
| Changes in the period: | |||||||||
| Foreign currency translation adjustments | - | - | - | - | 340,866 | - | - | 340,866 | |
| Other changes recognized in shareholders' equity | - | - | - | - | (71,033,034) | (21,729,839) | - | (92,762,872) | |
| B | - | - | - | - | (70,692,167) | (21,729,839) | - | (92,422,006) | |
| Net income | C | - | - | - | - | - | - | (2,355,645) | (2,355,645) |
| Comprehensive income | B+C | - | - | - | - | - | (21,729,839) | (2,355,645) | (24,085,484) |
| Operations with shareholders: | - | ||||||||
| Application of the previous year's earnings | - | - | - | - | - | (14,316,500) | 14,316,500 | - | |
| Acquisition of treasury shares Disposal of treasury shares |
- - |
(1,282,867) 21,347,517 |
- - |
- - |
- - |
1,282,867 - |
- - |
- 21,347,517 |
|
| D | - | 20,064,651 | - | - | - | (13,033,633) | 14,316,500 | 21,347,517 | |
| Balance as at 31 December 2021 | E=A+B+C+D | 26,895,375 | (164,809,193) | 6,773,139 | 264,283,232 | (162,814,562) | 123,971,923 | (2,355,645) | 91,944,268 |
| Changes in the period: | |||||||||
| Foreign currency translation adjustments | - | - | - | - | (5,451,203) | (5,451,203) | |||
| Other changes recognized in shareholders' equity | - | - | - | (21,347,517) | (14,253,797) | 21,347,517 | - | (14,253,797) | |
| F | - | - | - | (21,347,517) | (19,705,000) | 21,347,517 | - | (19,705,000) | |
| Net income | G | - | - | - | - | - | - | (2,509,260) | (2,509,260) |
| Comprehensive income | F+G | - | - | - | (21,347,517) | (19,705,000) | 21,347,517 | (2,509,260) | (22,214,260) |
| Operations with shareholders: | - | ||||||||
| Application of the previous year's earnings | - | - | - | - | - | (2,355,645) | 2,355,645 | ||
| H | - | - | - | - | - | (2,355,645) | 2,355,645 | - |
| PHAROL, SGPS, S.A. | ||
|---|---|---|
| STATEMENT OF CASH FLOWS | ||
| FOR THE PERIODS ENDED 31 DECEMBER 2021 AND 31 DECEMBER 2020 | ||
| Notes | 2022 | Euro 2021 |
| OPERATING ACTIVITIES Payments to suppliers |
(1,144,566) | (1,300,227) |
| Payments to employees | (1,007,741) | (1,451,531) |
| Payments relating to income taxes | (30,408) | (29,000) |
| Other cash receipts, net | 508,252 | (383,228) |
| Cash flows from operating activities related to continuing operations (1) | (1,674,463) | (3,163,986) |
| INVESTING ACTIVITIES | ||
| Cash receipts resulting from: | ||
| Short-term financial applications | ||
| Financial investments 4.a. Interest and related income |
13,920,000 1,563 |
3,000,000 - |
| 13,921,563 | 3,000,000 | |
| Payments resulting from: | ||
| Short-term financial applications | (10,000,000) | - |
| Tangible and intangible assets | (1,796) | (45,885) |
| (10,001,796) | (45,885) | |
| Cash flows from investing activities related to continuing operations (2) | 3,919,767 | 2,954,115 |
| FINANCING ACTIVITIES | ||
| Cash receipts resulting from: | ||
| Short-term financial applications | - | 34,323 |
| Disposal of Own Shares | - - |
900,545 934,868 |
| Payments resulting from: | ||
| Loans repaid | (9,808) | - |
| Interest and related expenses | (2,318) | (2,635) |
| Acquisition of Own Shares | - (12,127) |
(1,282,559) (1,285,195) |
| Cash flows from financing activities related to continuing operations (3) | (12,127) | (350,327) |
| Cash and cash equivalents at the beginning of the period Change in cash and cash equivalents (4)=(1)+(2)+(3) |
16,551,837 2,233,177 |
17,112,035 (560,198) |
| Cash and cash equivalents at the end of the period 4.b. |
18,785,014 | 16,551,837 |
| The accompanying notes form an integral part of these financial statements. | ||
(Amounts in Euro, otherwise it will be referred)
PHAROL, SGPS, S.A. ("PHAROL", "PHAROL SGPS" or "Company") was founded on June 23, 1994 pursuant to Decree -Law No. 122/94, through the merger of the following companies: Telecom Portugal, S.A., Telefones de Lisboa e Porto (TLP), S.A. ("TLP") and Teledifusora de Portugal, S.A. ("TDP"), with reference to January 1, 1994. As a result of the privatization process, between June 1, 1995 and December 4, 2000, PHAROL's share capital is mainly owned by private shareholders. On December 12, 2000, Portugal Telecom, S.A. changed its name to Portugal Telecom, SGPS, S.A. ("PT SGPS") and its operation to a capital management company. On May 29, 2015, the company changes its name to PHAROL, SGPS S.A.
On May 5, 2014, Oi underwent a capital increase amounting to 13,960 million reais, composed of: (1) 5,710 million reais (Euro 1,750 million based on the exchange rate as of February 21, 2014) corresponding to 1,045,803,934 ordinary shares and 1,720,252,731 preferred shares subscribed by PHAROL, through a contribution in kind of the PT Assets, defined as the PHAROL's 100% stake in PT Portugal, which as of that date included all operational businesses of the PHAROL Group, with the exception of the subsidiaries Bratel BV, Bratel Brasil, PTB2 and PHAROL, and of the investment in Oi, Contax and their controlling shareholders; and 8,250 million reais in cash subscribed by investors other than PHAROL. The valuation of PT Assets of 5,710 million reais was determined on the basis of the valuation of PT Portugal by Banco Santander (Brasil), SA on the date of the share capital increase. As a result of PHAROL' contribution for the capital increase of Oi, PHAROL increased its effective interest in Oi from 23.2%, previously held through Bratel Brasil, to an economic interest of 39.7%, held through a total direct interest of 35.8% (32.8% in PHAROL and 3.0% in Bratel Brasil) and an indirect interest of 3.9% held by Bratel Brasil through the controlling shareholders of Oi.
On March 28, 2011, PHAROL completed the initial acquisition of investments in Telemar Norte Leste, S.A. ("Telemar"), which belongs to the Oi Group, and Contax, for the amount of 8,437 million reais, and entered into several agreements with the controlling shareholders of these companies. As a result of this transaction, PHAROL acquired an effective stake of 25.3% in TmarPart (parent company of the Oi Group on that date) and 14.1% in Contax. Within the scope of this acquisition, PHAROL, AG Telecom Participações ("AG") and LF Tel, SA ("LF"), two of the main shareholders of TmarPart, the controlling shareholder of Oi, entered into a shareholders' agreement with unanimous voting procedures for their representatives in the Board of Directors of TmarPart regarding the strategic, financial and operating decisions relating to the activity of the Oi Group. Whereby, in accordance with the provisions of NCRF 13 Interests in Joint Ventures and Investments in Associates ("NCRF 13"), the Company concluded that it contractually shares
the control of TmarPart, therefore the Oi investment was classified as a joint venture and thus accounted for in accordance with the equity method.
On May 5, 2014, directly and indirectly, PHAROL held investments in debt securities issued by Rio Forte Investments, S.A. ("Rio Forte", a holding company of the Espírito Santo Group with registered address in Luxembourg essentially for their non-financial services) amounting to Euro 897 million, which formed part of the PT Assets and were contributed in the capital increase of Oi. The composition of the outstanding amount as of May 5, 2014 was as follows:
On July 15 and 17, 2014 the maturity of these instruments occurred, but the issuer did not settle its obligations.
Rio Forte requested the adoption of the controlled management regime in accordance with the Luxembourg legislation, although it was their understanding that they did not have the financial capacity to meet their financial commitments, a situation which was thought to be the most protective of their creditors' interests, and that was rejected by the Luxembourg court. As a result of that rejection, Rio Forte was declared insolvent by the Luxemburg Court on December 8, 2014 and went into liquidation on the same date.
On July 28, 2014, following the default by Rio Forte, PHAROL and Oi agreed on the main terms for the exchange of debt securities of Rio Forte held on that date by PT Finance and PT Portugal, amounting to Euro 897 million for 47,434,872 common shares and 94,869,744 preferred shares of Oi (after the reverse stock split done by Oi in December 2014) held on that date by PHAROL. On September 8, 2014, this agreement was approved in the General Shareholders' Meeting of PHAROL and following such approval the parties involved concluded the respective final contracts, the terms of which established that:
An American non-transferable purchase option ("Call Option") would be attributed to PHAROL in order to reacquire the Oi Shares that are the Object of the Exchange (with the exercise price of 20.104 reais for common shares and 18.529 reais for preferred shares after the Oi reverse stock split), which would be adjusted by CDI plus 1.5% per year;
The Call Option on the Oi Shares that are the Object of the Option would enter into effect on the date of the Exchange and would have a maturity of six years, with the possibility of exercising the option by PHAROL terminating at 10% at the end of the first year and 18% at the end of each subsequent year;
On December 31, 2014, as stated above, execution of the exchanges and the purchase option were pending approval by the CVM. On March 4, 2015, the CVM approved the above contracts, conditional upon their approval at Oi's General Shareholders' Meeting, which occurred on March 26, 2015. The exchange was executed on March 30, 2015. On March 24, 2015, PHAROL came to an agreement with Oi, PT Portugal, PT Finance and TmarPart for the Private Instrument of Assignment of Rights and Obligations and Other Fees ("Assignment Agreement"), by means of which PT Portugal transferred the Rio Forte Instruments to PT Finance, and conceded to PT Finance all pertaining rights and obligations in the terms of the Exchange Agreement ("Assignment").
On March 30, 2015, the Exchange was concluded, by means of which PHAROL (1) deposited Oi's shares object of the Exchange with the Depositary; and (2) instructed the Depositary to register the transfer of 47,434,872 ADSs ON and 94,896,744 ADSs PN to PT Finance, representing Oi's shares object of the Exchange. Therefore, on March 30, 2015, PHAROL transferred the ADSs Object of the Exchange to PT Finance, and PT Finance transferred to PHAROL the Rio Forte Instruments in the total main amount of Euro 897 million.
Still, on March 30, 2015, the Call Option was effective.
A change ("Amendment") was signed to the Share Purchase Option Contract and Other Agreements, entered into on September 8, 2014, such as mentioned above, which allowed PHAROL to liquidate its Oi share purchase option through sale on the market, giving Oi the right of first refusal in the acquisition of the Option if PHAROL should decide to sell it to third parties without previous consent by Oi. The Amendment was subject to approval of Oi's general shareholders' meeting and, if applicable, to the CVM's approval. Oi committed to convene a general meeting to discuss the Amendment, and the reference shareholders of Oi committed to vote in approval of the Amendment.
This call option had a maturity of 6 years and expired in March 2021.
On March 31, 2015, the Board of Directors of PHAROL concluded negotiations with the other shareholders pertaining to Oi to the extent of signing a new agreement between the parties in relation to the company structure and the administration of Oi. In view of the impossibility of implementing migration from CorpCo to the segment called Novo Mercado of the BM&FBovespa by March 31, 2015, the deadline stipulated in the agreements signed on September 8, 2014, it became essential to sign a new agreement, which allowed Oi to anticipate the principal benefits announced to shareholders at the time that Oi's capital increase was realized on May 5, 2014, without, however, failing to make every effort to migrate to the Novo Mercado. Thus, the parties agreed to a new company structure model and administration of Oi ("New Structure"), that in addition to the benefits and objectives disclosed before, are characterized by the following:
On July 22, the relevant documents for the implementation of the Oi's New Structure were signed and on September 1, 2015, Oi's General Assembly approved its implementation.
On September 30, 2015, after the implementation of the New Structure and prior to the voluntary conversion of preferred shares into common shares of Oi, PHAROL held, directly and through 100% subsidiaries, 84,167,978 ordinary shares and 108,016,749 preferred shares of Oi.
On October 8, 2015, following the approval of voluntary conversion of preferred shares into common shares of Oi, the PHAROL held, directly and indirectly through 100% subsidiaries owned, 183,662,204 common shares of Oi, representing 27.18% of the total share capital of Oi (excluding treasury shares held by Oi itself). PHAROL's right to vote in Oi is limited to 15% of the total common shares.
The shareholders' agreements through which joint control of Oi was exercised, ended on July 30, 2015 with the implementation of the New Structure. Until then PHAROL proceeded to recognize its participation in Oi as an investment in joint ventures. PHAROL considered that it currently has significant influence over Oi, which is considered an associate. Thus, from July 30, 2015 participation in Oi continued to be measured according to the equity method, less any impairment, reflecting the stake in Oi's financial statements (27.18% as at December 31, 2016).
On April 29 and May 19, 2016, PHAROL, due to a corporate reorganization, transferred direct ownership of 128,213,478 common shares issued by Oi S.A., to its 100% owned subsidiary BRATEL B.V..
On 15 September 2017, in order to concentrate all its operations in Luxembourg, PHAROL transferred the ownership of all the shares that BRATEL BV has in Oi SA to its subsidiary 100% owned, BRATEL S.à.r.l., a company with its registered office in Luxembourg, at 69, Boulevard de la Pétrusse, L-2320 Luxembourg, and BRATEL BV ceased to hold a shareholding interest directly in Oi SA.
Accordingly, on December 31, 2017, PHAROL held all the shares representing the capital stock of BRATEL BV which, in turn, held all the shares representing BRATEL S.à.rl. Both PHAROL and BRATEL BV indirectly held 183,662,204 common shares of Oi SA, representing as of December 31, 2016, the direct interest of BRATEL BV (and indirectly of PHAROL, SGPS SA) is 183,662,204 common shares of Oi SA, which represent approximately 22.24 % of the total share capital of Oi SA (27.18% excluding treasury shares held by Oi itself).
On July 20, 2018, following the homologation of the Capital Increase through the conversion of debt into shares, Oi's share capital increased from 825,760,902 shares for a total of 2,340,060,505 shares, a dilution of PHAROL's participation in Oi to less than 8%.
On January 9, 2019, as part of the Capital Increase by the Entry of New Resources, Oi's share capital increased from 2,340,060,505 shares to a total of 5,954,205,001 shares representative of Oi's share capital, thereby diluting PHAROL's stake in Oi to less than 4%.
On April 2, 2019, with the approval of an agreement signed between PHAROL and Oi SA on January 8, 2019, in which Oi undertook to reimburse PHAROL through Oi shares and financial resources for the acquisition of Oi's shares, PHAROL now holds a 5.51% stake in Oi.
During 2020, PHAROL sold all preferred shares of Oi and a small portion of common shares, resulting in a final stake of 5.37% of Oi's share capital.
In 2021, after the execution of transactions to buy and sell Oi shares, PHAROL held a position of 5.38% of Oi (without treasury shares held by Oi itself).
In 2022, PHAROL again liquidated part of the position in Oi, with a final position of 2.20%.
As of December 31, 2022, PHAROL held as its main assets (1) 131,151,859 common shares of Oi S.A. ("Oi"), representing 2.20% of Oi's total share capital (excluding treasury shares held by Oi itself), (2) the debt instruments of Rio Forte Investments S.A. ("Rio Forte"), with a nominal value of 897 million Euros and currently valued at 51.9 million Euros, and (3) investment in stock and bond portfolios in the amount of 9.7 million Euros.
PHAROL considered to continue to have significant influence on Oi until December 2017, however, and after the decision by the 7th Business Court of the District of the Capital of the State of Rio de Janeiro, before which the Judicial Reorganization was being processed ("Court") , which decided to withdraw the rights of the members of the Board of Directors of Oi in the approval of the Judicial Reorganization Plan in which the company was found, it was understood that PHAROL had lost the significant influence it had until then held in its associate Oi SA .
Consequently, since December 31, 2017, PHAROL started to record its investment in Oi at market value, which is now classified as a "Financial Asset".
These financial statements are in respect of the Company individually and were prepared according to the generally accepted accounting principles in Portugal (Note 2). Financial investments are recorded according to the equity method, deducted of any eventual impairment losses, as referred to in Note 3.3. These individual financial statements consider the effect of the equity method, through the appropriation of the share held in the other changes in equity and in the results of the company's subsidiaries as at December 31, 2022 and 2021, in PHAROL's equity and net profit for the fiscal years ended on those dates, based on the respective financial statements, but not the effect of full consolidation of assets, liabilities, expenses and income.
In accordance with current legislation, the Company prepared consolidated financial statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU"), published separately. These consolidated financial statements include the financial statements of the companies which PHAROL controls, consolidated by the integral method.
The disclosures presented in these consolidated financial statements are complementary, with the necessary adaptations, to the disclosures presented in these financial statements.
The financial statements for the year ended December 31, 2022 were approved by the Board of Directors and authorized for issue on March 02, 2023 and are still subject of approval by the General Meeting of Shareholders under the commercial legislation in Portugal.
The Company's financial statements were prepared in accordance with the framework of the Accounting Standardization System (SNC), which integrates the Financial Reporting Accounting Standards (NCRF), adapted by the Accounting Standardization Committee (CNC) from the International Financial Reporting
Standards (IFRS, formerly known as International Accounting Standards) issued by the International Accounting Standards Board (IASB) and adopted by the European Union (EU). The legal diplomas referring to the SNC are:
PHAROL chose not to apply NCRF 27 to these financial statements, having chosen to recognize, measure and disclose its financial instruments in accordance with International Financial Reporting Standards ("IFRS"), as adopted in the European Union.
The Company adopted the NCRF for the first time in 2010, having applied for this purpose the "NCRF 3 Firsttime adoption of the NCRF" ("NCRF 3"), with January 1, 2009 being the transition date for the purposes of presenting these financial statements. financial. The Company additionally applies the International Accounting and Financial Reporting Standards ("IAS/IFRS") and the respective interpretations ("SIC/IFRIC") issued by the International Accounting Standards Board ("IASB"), in order to fill gaps or omissions. relating to specific aspects of some transactions or particular situations not provided for in the SNC. dec/22 dec/21 Company Activity Direct Effective Effective Bratel BV Amsterdam Subsidiaries Management of investments Pharol SGPS (100%) 100% 100% PT Brasil São Paulo Subsidiaries Management of investments Bratel BV (100%) 100% 100%
Since January 1, 2005, PHAROL's consolidated financial statements have been prepared in accordance with IFRS as adopted in the European Union, pursuant to regulations applicable to companies listed on European Union stock exchanges.
The PHAROL Group is made up of the following companies:
| Type of | ||||
|---|---|---|---|---|
| Head office | ||||
| Subsidiaries | 100% | 100% | ||
| Luxembourg | Management of investments Bratel BV (100%) |
It should be noted that PHAROL as of December 31, 2022 and 2021 had a stake in Oi of 2.2% and 5.38%, respectively.
These individual financial statements were prepared on a going concern basis of accounting. The main accounting policies used in the preparation of these individual financial statements are described below and were applied consistently.
Tangible fixed assets are recorded at acquisition cost, which includes the amount paid to acquire the asset and any expenses directly attributable to bringing the assets to the location and in the condition necessary for their operation.
Tangible fixed assets are depreciated on a straight-line basis from the month they are available for use. The depreciation rates reflect the useful life of each class of assets, as follows:
| Asset class | Years of useful life |
|---|---|
| Transportation equipment | 4 |
| Admnistrative equipment | 3 - 8 |
| Other tangible fixed assets | 4 - 8 |
The gains and losses resulting from any write-off or disposal are determined by the difference between the amount received and the carrying value of the asset and are recognized in the income statement when the write-off or disposal occurs.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. The remaining lease contracts are considered operating leases. The classification of leases depends on the substance of the transaction and not on the form of the contract.
Assets acquired under finance leases and the corresponding liabilities are accounted for at the beginning of the contract as the lower amount between the fair value of the assets and the present value of minimum lease payments. Rents include the reimbursement of the liability and interest expense, with interest being recognized in the income statement based on a periodic interest rate over the remaining liability.
Under operating leases, rents are recognized on a straight-line basis during the period of the lease.
Subsidiaries are those entities over which the Company has the power to govern the financial and operating policies of the entity, generally represented by the majority of the voting rights. Associate companies are entities over which the Company has a significant influence but not control, generally represented by stakes between 20% and 50% of voting rights. Joint venture is an economic activity with the engagement of two or more partners subject to joint control based on a contractual agreement.
Financial investments in subsidiaries, associate companies and joint ventures are recorded under the equity method of accounting. Under this method, financial investments are initially recorded at acquisition cost and subsequently adjusted for the changes, after the acquisition date, in the Company's share in the net assets of those entities, deducted for eventual impairment losses. PHAROL's earnings include its share in the earnings of its subsidiaries and associate companies.
Financial investments in foreign entities are translated to Euros using the exchange rates prevailing at the balance sheet date, while the Company's share in the earnings of those entities is computed based on the average exchange rates for the reported period. The effect of translation differences is recognized
| in shareholders' equity under the caption "Adjustments to financial assets" and is transferred to net income | ||
|---|---|---|
| upon the disposal of a foreign entity or the transmission of the investment in another way. The exchange rates used in the translation of the main foreign entities (held directly or indirectly by PHAROL) are as follows: |
||
| Final Currency |
2022 2021 |
|
| Real | 5.6386 6.3101 |
|
| USD | 1.0387 1.1326 |
|
| Average Currency |
2022 2021 |
|
| Real | 6.3779 5.4454 |
Gains obtained in transactions with subsidiaries, associates companies and joint ventures are eliminated in proportion to the Company's share in those entities, against the financial investment.
Capital gains resulting from the disposal of subsidiaries and associated companies within the Group are deferred or reversed until the date these investments are disposed of to a third party. Whenever these gains are deferred, their recognition in earnings is made under the caption "Gains/(losses) of affiliated companies", in the proportion that goodwill or assets and liabilities identified in the allocation of the purchase price recorded by the acquirer is recognized in earnings.
Additional capital contributions and loans granted to subsidiaries, associates companies and joint ventures are recorded at nominal value, reduced by adjustments for estimated losses, if applicable.
The Company records its revenue and expenses as they are generated or incurred, regardless of when they are received or paid, respectively.
With regard to the recognition of expenses with taxes on the purchase of external services (e.g. nondeductible value added tax), the amounts are classified as indirect taxes.
Income tax expense corresponds to the sum of current and deferred taxes. Deferred taxes are recognized in earnings except when they relate to items recorded directly in shareholders' equity, in which case they are also recorded in shareholders' equity.
The current income tax is computed based on the estimated taxable income for corporate income tax purposes, based on the statutory tax rate in Portugal, which is increased by a municipal tax and/or by an additional state surcharge depending on the taxable profit of the year (Note 10).
The income tax expense recorded in the financial statements was determined in accordance with "NCRF 25 Income Taxes". In determining income tax expense for the year, besides the current tax based on profit before-tax adjusted in accordance with the tax legislation, it is also considered the effects of temporary differences between income before tax and taxable income originated in the year or in preceding years.
Deferred taxes correspond to the temporary differences between assets and liabilities for accounting purposes and the related amounts for taxable purposes. Deferred tax assets and liabilities are computed and evaluated annually, using the tax rates which are expected to be in force at the date of reversal of these temporary differences.
Deferred tax assets are recorded only when there is a reasonable expectation of sufficient future tax profits which allow for their use. As at the balance sheet date the Company conducts a reassessment of the temporary differences originating deferred tax assets, in order to record deferred tax assets not recognized previously and/or to reduce the amount of deferred tax assets that are recognized, based on the current estimate of its recoverable amount.
Accounts receivables are initially recognized at fair value, and subsequently measured at amortized cost, based on the effective interest rate method, reduced by impairment losses.
Impairment losses for doubtful accounts receivable are computed based on the evaluation of the estimated risks resulting from the non-collection of receivables and are recorded in the income statement.
The Company recognizes provisions when there is a present obligation arising from past events provided that there will be it is probable as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where any of the above-mentioned criteria is not accomplished, the Company discloses the event as a contingent liability, unless the cash outflow is remote.
Provisions are recognized for an amount corresponding to the present value of the best estimate, at the reporting date, of the resources needed to settle the obligation. That estimate is determined considering the risks and uncertainties associated with the obligation. Provisions are reviewed at the end of each year and adjusted for in order to reflect the best estimate as of that date.
Loans obtained are initially recognized at fair value, net of transaction costs incurred, and subsequently presented at amortized cost, based on the effective interest method.
Own shares are accounted for at their acquisition value as a reduction of shareholders' equity in the caption "Own shares", and the gains or losses inherent to their disposal are recorded in "Retained earnings".
Realizable assets and liabilities due over a period greater than one year from the balance sheet date are classified under non-current assets and non-current liabilities, respectively, at present value.
Transactions denominated in foreign currencies (different from the Company´s domestic currency, "Euro") are translated to Euros at the exchange rates prevailing at the time the transactions are made. Assets and liabilities in foreign currency for which there is no agreement for fixing an exchange rate are translated to Euros using the exchange rates prevailing at the balance sheet date. Favorable or unfavorable exchange rate differences arising from the differences between exchange rates in force at the date of the respective transactions and those applying on the date of collection or payment or at the balance sheet date are recorded as gains and losses in the income statement. Currency 2022 2021 Real 5.6386 6.3101 USD 1.0387 1.1326
Assets and liabilities as at December 31, 2022 and 2021 were translated into Euros using the following exchange rates to the Euro reported by the Portuguese Central Bank:
Financial assets and liabilities are recognized in the balance sheet when the Company becomes part of the corresponding contractual terms, and are classified in the following categories: (a) at cost or amortized cost; and (b) at fair value, with the respective changes being recorded in the income statement.
Assets and liabilities are classified at cost or amortized cost if they: (a) have a defined maturity; (b) have a fixed or determined income; and (c) do not represent or include a derivative financial instrument.
Assets and liabilities classified in this category are measured at amortized cost reduced by accumulated impairment losses (for financial assets) and correspond primarily to the following asset and liability captions included in the Company's balance sheet:
Amortized cost is determined through the effective interest method. The effective interest rate is the one that discounts the estimated future payments and receipts, during the term of the financial instrument, to the carrying value of the financial asset or liability.
All remaining financial assets and liabilities not included in the category "cost or amortized cost" are recognized at fair value. These financial assets and liabilities correspond primarily to interest and exchange rate derivative financial instruments.
The changes in the fair value of these derivatives are recognized through shareholders' equity or profit and loss, depending on whether those derivatives meet or not the criteria for hedge accounting, respectively. These changes in fair value are recorded under the caption "Increases/(reductions) in fair value" (Note 17).
We include in this category the portfolio of investments in bonds and shares measured at fair value with the changes recognized in results.
Financial assets accounted as "cost or amortized cost" are subject to impairment tests at the end of each year. Such assets are impaired when there is clear evidence that, as a result of one or more events occurred after their initial recognition, their future estimated cash flows will be affected.
For assets measured at amortized cost, the impairment loss corresponds to the difference between the carrying amount of the asset and the present value of the revised future estimated cash flows discounted using the initial effective interest rate. For financial assets measured at cost, the impairment loss corresponds to the difference between the carrying amount of the asset and the best estimate of the asset's fair value.
Subsequently, if there is a reduction in the impairment loss as a result of an event occurred after the initial recognition of the loss, the impairment should be reversed through earnings. The reversal is recognized up to the limit of the amount that would be recorded (at amortized cost) if the loss had not been initially recognized.
The Company derecognizes financial assets when its contractual rights to obtain the asset's cash flows expire, or when it transfers to another entity all the significant risks and rewards associated with the ownership of those assets. The Company derecognizes financial liabilities only when the corresponding obligation is settled, cancelled or expires.
When preparing the financial statements in accordance with the NCRF, the Company's Board of Directors uses estimates and assumptions that affect the application of accounting policies and reported amounts. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are considered probable under the circumstances on which the estimates are based, or as a result of new information or more experience. The most significant accounting estimates reflected in the financial statements are as follows:
Estimates used are based on the best information available during the preparation of financial statements, although future events, neither controlled nor foreseeable by the Company, could occur and have an impact on those estimates. In accordance with "NCRF 4 Accounting Policies, Changes in Estimates and Errors" ("NCRF 4"), changes to these estimates that occur after the date of the financial statements are recognized in net income, using a prospective methodology.
Events occurred after the balance sheet date that provide additional information about conditions existing at the balance sheet date are reflected in the financial statements. Events occurred after the balance sheet date that provide information about conditions that occur after the balance sheet date are not reflected in the financial statements but are disclosed in the notes to the financial statements, if material.
The caption "Cash and cash equivalents" of the statement of cash flows includes cash on hand and bank deposits readily convertible to cash.
| The Company is exposed to a liquidity risk if its sources of funding, including cash balances, operating cash | ||
|---|---|---|
| inflows, divestments, credit lines and cash flows obtained from financing operations, do not match its | ||
| financing needs, such as operating and financing outflows, investments, shareholder remuneration and debt | ||
| repayments. The Company understands that it has the ability to fulfill its obligations. | ||
| The cash flow statement was prepared in accordance with "NCRF 2 Statement of Cash Flows", with the | ||
| following aspects worth mentioning. | ||
| a) Receives resulting from financial investments | ||
| In 2022 and 2021, receipts from financial investments are related to reductions in the capital of PHAROL's | ||
| direct subsidiary, Bratel BV. | ||
| b) Cash and cash equivalents | ||
| As at December 31, 2022 and 2021, this caption is made up as follows: | ||
| Euro | ||
| 2022 | 2021 | |
| Cash | 4,667 | 2,399 |
| 18,780,347 | 16,549,438 | |
| Bank deposits immediately available | 18,785,014 | 16,551,837 |
The Company did not adopt any new or revised standard or interpretation during the year ended December 31, 2021 and did not voluntarily change other accounting policies or accounting estimates.
During the year ended December 31, 2022, the Company did not adjust its financial statements for any material errors from previous years.
| 6. Equity Investments |
|||
|---|---|---|---|
| Equity method | |||
| During 2022 and 2021, the movements occurred in this caption were as follows: | |||
| Euro 2022 |
|||
| Investments in subsidiary companies | |||
| Oi Shares (Fair | Equity Income | ||
| value) | (net of | ||
| investment in Oi) | Total | ||
| Opening balance | 38,565,494 | 1,346,997 | 39,912,489 |
| Net income subsidiaries | - | (126,596) | (126,596) |
| Reductions/Increases | (19,705,000) | - | (19,705,000) |
| Venda de participação | (14,906,353) | - | (14,906,353) |
| Changes in equity Closing balance |
- 3,954,140 |
986,351 2,206,753 |
986,351 6,160,893 |
| Euro 2021 |
|||
| Investments in subsidiary companies | |||
| Oi Shares (Fair | Equity Income | ||
| value) | (net of investment in Oi) |
Total | |
| Opening balance | 110,255,384 | 3,589,126 | 113,844,509 |
| Net income subsidiaries | - | (242,861) | (242,861) |
| Reductions/Increases | (70,692,167) | - | (70,692,167) |
| Changes in equity | (997,723) | (1,999,268) | (2,996,991) |
| Closing balance | 38,565,494 | 1,346,997 | 39,912,489 |
As at 31 December 2022, this item essentially includes: 1) an estimated future recovery of approximately EUR 51.9 million for debt instruments issued by Rio Forte, and 2) a portfolio of financial investments in assets in the approximate amount of EUR 9.7 million.
Regarding the debt instruments issued by Rio Forte, after having learned the Report of Judicial Administrators in the Rio Forte insolvency process (Rapport nº 4 des Curateurs), dated August 31, 2016, available at 40Twww.espiritosantoinsolvencies.lu 40T , PHAROL initiated efforts to analyze the financial, accounting and legal implications of what is contained in point 2.1.6., which is transcribed in free translation:
"Predictable recovery
The information currently available to the Judicial Administrators does not allow an estimate to be made, either of the total recovery, or of the recovery to be made by the company in bankruptcy.
It cannot be ruled out that judicial foreclosure and the possible rights of third parties involved will prevent for a prolonged period, or even definitively, the bankruptcy estate from recovering and distributing certain assets. In fact, it is not excluded that the judicial authorities have the objective of confiscating the assets now being held."
PHAROL's Management, after due diligence and supported by the analysis of its advisors, concluded, on that date, by a principle of prudence, that the expected values of recovery of assets by the mass of the insolvent and, consequently, by PHAROL, with Rio Forte had reduced. PHAROL's investment in Rio Forte's securities was initially valued at fair value upon its initial recognition on March 30, 2015, and subsequently measured at amortized cost less any impairment losses. Based on the basic principles set out in IAS 39 (currently IFRS 9), Management, based on the information available, used its judgment in the definition of assumptions that culminated in a credit appreciation of Rio Forte by 85.7 million Euros at 31 December 2016. This reflects a value of about 9.5% of the nominal value, against approximately 15% of the nominal value at 31 December 2015, which determined the accounting of an impairment in the amount of € 48.8M.
Additionally, in December 2017, after the update of the amount of credit complaints considered in the last report of the Judicial Administrators was higher than previously considered, the debt recovery valuation was revised downwards again, having registered at 8.32 % of recovery, which is equivalent to a reduction of 11.1 million Euros to the amount of 74.6 million Euros. At 31 December 2018, the debt recovery amount remained at 8.32%.
In April 2019 and 5 years after the filing of the Rio Forte credit claim, a new report by the Judicial Administrators was published on 30 April 2019, which essentially points to: 1) postponement of the results of the conclusion of the analysis. debt declarations; and 2) downward revision of Rio Forte's asset value in Latin America; Accordingly, and based on these new factors, the recovery in debt recovery was once again revised downwards to 7.19% of nominal value recovery, equivalent to a reduction of 10.1 million euros to the amount of 64.5 million euro. At the end of 2019 and after the analysis of the last report issued by the Judicial Administrators, with effect on December 31, 2019, it was once again revised downwards, with the face value recovery set at 7.02 %, which is equivalent to an additional reduction of 1.5 million Euros to a total recovery amount of 63 million Euros. On December 31, 2020, a new downward revision of the nominal value recovery was carried out to 5.79%, essentially justified by the depreciation of assets held by Rio Forte in Latin America, which is equivalent to a reduction of 11.1 million of Euros to the amount of 51.9 million Euros.
As at 31 December 2021, considering the maintenance of the main valuation factors of Rio Forte's Assets, and, with no evolution in the amount of claimed debts, the expected recovery value of Rio Forte's nominal debt remained unchanged at 5 .79% equivalent to 51.9 million Euros.
Additionally, and still within the scope of the credit on Rio Forte, PHAROL in December 2017 learned of a statement from the curators of Espírito Santo International, SA, ("ESI") in which they declare that this
bankrupt company will evaluate the possibility to sue PHAROL, asking for the latter to be ordered to reimburse 750 million Euros, without specifying the grounds for that request.
Following this statement, already in January 2019, PHAROL was notified by ESI's curatorship, as a precautionary measure to interrupt any limitation period, with a view to an eventual cancellation of Notes payments made by ESI during January 2014.
After analyzing the aforementioned subpoena, Pharol considers the probability, on the basis of the alleged facts, of obtaining any conviction of Pharol under the subpoenaed terms, to be highly remote, being the judicial process yet to be started until the present date. Accordingly, PHAROL has not made any provision in its financial statements.
Additionally, in August 2022, Pharol subscribed to two investment portfolios in financial assets composed mainly of groups of assets of Bonds and Shares of listed companies. The portfolios are managed by a banking entity that has the discretionary power to buy and sell the assets that compose it, with which a contract was signed that assumes the maintenance of these portfolios for a period of more than one year. These financial assets are part of a portfolio of identified financial instruments and for which there is evidence of a recent pattern of profit-taking in the short and medium term. Upon initial recognition, they are recorded at acquisition cost and subsequently at fair value, with changes in fair value recognized in profit or loss. With regard to these assets, on 31 December 2022 the variation in the fair value of the portfolio is as follows: Initial investment value in the Portfolio 10,000,000 Var. Fair Value – Gains or Losses on Oct. non-current assets -310,423
| Portfolio fair value variation | |
|---|---|
| euros | |
| Portfolio value on December 31, 2022 | 9,689,577 |
With regard to these assets, at 31 December 2022 the portfolio is made up as follows:
| Portfolio Breakdown | |
|---|---|
| Euro | |
| Asset Group | |
| Liquidity | 317,952 |
| Investment Grade Bonds Actions |
8,079,187 1,292,438 |
| 9,689,577 | |
| Group by Geographic Allocation | |
| Europe (former UK) | 4,805,606 |
| USA | 2,333,658 |
| Other Developed | 987,162 |
| UK Japan |
757,526 479,855 |
| 317,952 | |
| Liquidity | |
| Unclassified | 7,819 |
| 9,689,577 | |
| Group by sectoral allocation | |
| Financial | 4,505,182 |
| Funds | 1,163,238 |
| Cyclical consumer goods Raw material |
1,824,659 430,180 |
| Utilities | 195,566 |
| Non-cyclical consumption | 394,214 |
| Communications | 345,030 |
| Industry | 337,521 |
| Liquidity | 317,952 |
| Energy | 16,616 |
| Others | 159,419 9,689,577 |
In 2021 and 2020, the financial investments in subsidiaries and joint ventures refer exclusively to direct participation in Bratel BV.
For the fiscal years ended December 31, 2022 and 2021, fixed remuneration of Board members, which were established by the Remuneration Committee, amounted to Euro 368 thousand and Euro 473 thousand, respectively. The amounts mentioned above are added to the remuneration of the Board Member Ana Cristina Dias paid directly to Novo Banco, the shareholder she represents.
At December 31, 2022 and 2021 no share-based program or termination benefit program were in place.
For the year ended December 31, 2022, the fees paid to the Statutory Auditor of PHAROL amounted to Euro 38,1 thousand, corresponding to audit fees of PHAROL.
For additional information related to the remuneration of members of the Board of Directors and key employees, we refer readers to the Corporate Governance Report included in the Annual Report.
In 2022, the companies located in mainland Portugal were subject to Corporate Income Tax at a base rate of 21%, with an additional (1) Municipal Surtax of up to 1.5% levied on taxable income, and (2) a State Surtax of 3.0% levied on taxable profit between Euro 1.5 million and Euro 7.5 million, of 5.0% levied on taxable profit between Euro 7.5 million and Euro 35 million and of 9% levied on taxable profit in excess of Euro 35 million, resulting in a maximum aggregate tax rate of approximately 31.5%, for taxable profit with surpass Euro 35 million. In the calculating of taxable income, to which is applied above mentioned tax rate, income and expenses not deductible for tax purposes are added to or deducted from the accounting results. Receivable Payable Receivable Payable
| Surtax of 3.0% levied on taxable profit between Euro 1.5 million and Euro 7.5 million, of 5.0% levied on | ||||
|---|---|---|---|---|
| taxable profit between Euro 7.5 million and Euro 35 million and of 9% levied on taxable profit in excess of | ||||
| Euro 35 million, resulting in a maximum aggregate tax rate of approximately 31.5%, for taxable profit with | ||||
| surpass Euro 35 million. In the calculating of taxable income, to which is applied above mentioned tax rate, | ||||
| income and expenses not deductible for tax purposes are added to or deducted from the accounting results. | ||||
| According to the applicable legislation, the tax statements are subject to revision and correction by the fiscal | ||||
| authorities during a period of four years (five for Social Security) except if there have been fiscal losses, or | ||||
| if fiscal benefits have been granted, or if audits, claims or impeachments are being performed, in which | ||||
| case, depending on the circumstances, those periods may be extended or suspended. | ||||
| 10. State and other public entities | ||||
| On December 31, 2022 and 2021, the debtor and creditor balances in respect of State and Other Public | ||||
| Entities are as follows: | ||||
| 2022 | 2021 | |||
| Receivable | Payable | Receivable | Payable | |
| Current taxes | ||||
| Operations in Portugal | ||||
| Value-added tax | - | 10,433 | - | 7,197 |
| Income taxes Personnel income tax witholdings |
- - |
29,938 19,971 |
3,506 - |
30,018 27,979 |
| Social Security Contributions | - | 62,735 | - | 71,734 |
| - | 123,076 | 3,506 | 136,927 | |
| As a tax loss was calculated for the years 2022 and 2021, the current tax above only reflects the autonomous | ||||
| taxation that is levied on expenses with light vehicles and representation expenses. | ||||
| 11. Shareholders' equity | ||||
| 11.1. Share Capital |
||||
| As at December 31, 2022, the Company's share capital was fully paid and amounted to Euro 26,895,375 | ||||
| and was represented by 896,512,500 common shares with a nominal value of 3 cents of Euro each. | ||||
| 11.2. Own shares |
||||
| As of December 31, 2022 and 2021, the detail of this caption is as follows: | ||||
| Euro | ||||
| 2022 | 2021 | |||
| Shares held by PHAROL | 164,809,193 | 164,809,193 |
| - | 123,076 | 3,506 | 136,927 | |
|---|---|---|---|---|
| As a tax loss was calculated for the years 2022 and 2021, the current tax above only reflects the autonomous taxation that is levied on expenses with light vehicles and representation expenses. 11. Shareholders' equity |
||||
| 11.1. Share Capital |
||||
| As at December 31, 2022, the Company's share capital was fully paid and amounted to Euro 26,895,375 and was represented by 896,512,500 common shares with a nominal value of 3 cents of Euro each. 11.2. Own shares |
||||
| As of December 31, 2022 and 2021, the detail of this caption is as follows: | ||||
| Euro | ||||
| Shares held by PHAROL | 164,809,193 | 164,809,193 |
| Portuguese law establishes that at least 5% of each annual profit must be allocated to a legal reserve | ||||
|---|---|---|---|---|
| until this reserve equals the minimum requirement of 20% of share capital. This reserve is not available | ||||
| for distribution to shareholders but may be capitalized or used to absorb losses, once all other reserves | ||||
| and retained earnings have been exhausted. | ||||
| As at December 31, 2022, the legal reserve was already fully incorporated in accordance with Portuguese | ||||
| law and amounted to Euro 6,773,139.00. | ||||
| 11.4. Other reserves |
||||
| The composition and the movements effected in this item during the years of 2022 and 2021 are as follows: | ||||
| Euro | ||||
| Reserves for treasury |
||||
| Free reserve | shares cancelled | Own shares | Total | |
| Balance as at 31 December 2020 Transfer to reserves for use in own shares |
72,439,068 20,064,651 |
6,970,320 - |
184,873,844 (20,064,651) |
264,283,232 - |
| Transfer to retained earnings | - | - | - | - |
| Balance as at 31 December 2021 | 92,503,718 | 6,970,320 | 164,809,194 | 264,283,232 |
| Transfer to reserves for use in own shares | - | - | - | - |
| Transfer to retained earnings | (21,347,517) | - | - | (21,347,517) |
| Balance as at 31 December 2022 | 71,156,201 | 6,970,320 | 164,809,194 | 242,935,715 |
| 11.5. Adjustments to financial assets |
||||
| During the fiscal years of 2022 and 2021 the movements under this item were as follows: | ||||
| Euro | ||||
| Currency | Other changes in | |||
| translation | shareholders' | Total | ||
| adjustments | equity | |||
| Balance as at 31 December 2020 | (135,587,303) | 10,185,815 | (92,122,395) | |
| Equity method (Note 6) | 340,866 | (71,033,034) | (70,692,167) | |
| Balance as at 31 December 2021 | (135,246,437) | (60,847,219) | (162,814,562) |
| Transfer to reserves for use in own shares |
|---|
| Transfer to retained earnings |
| 11.5. Adjustments to financial assets During the fiscal years of 2022 and 2021 the movements under this item were as follows: |
| Balance as at 31 December 2020 |
| Equity method (Note 6) |
| Balance as at 31 December 2021 |
| Equity method (Note 6) |
Considering that in the year ended December 31, 2022 a negative result of Euros 2,509,260 was obtained, the Board of Directors of PHAROL proposes that it be transferred to the Company's Retained Earnings.
The negative result of Euros 2,355,645 obtained on 2021 was transferred to the Company's Retained Earnings.
The detail of this caption as at December 31, 2022 and 2021 is as follows:
| 2022 | Euro 2021 |
|
|---|---|---|
| Suppliers | 118,773 | 54,683 |
| Euro | ||
|---|---|---|
| Suppliers | 118,773 118,773 |
54,683 54,683 |
| 13. Accrued expenses | ||
| The detail of this caption as at December 31, 2022 and 2021 is as follows: | ||
| Euro | ||
| 2022 | 2021 | |
| 348,056 | ||
| Supplies and external services | 251,409 | |
| Vacation pay and bonuses | 179,086 | 219,451 |
| 430,495 | 567,507 | |
| 14. Equity in earnings/(losses) of affiliated companies | ||
| The detail of this caption as at December 31, 2022 and 2021 is as follows: | ||
| Euro | ||
| 2022 | 2021 | |
| Gains and losses in affiliated companies - equity method | (126,596) | (242,861) |
| (126,596) | (242,861) | |
| a) See Note 6 |
| Euro | |
|---|---|
| 430,495 | 567,507 | |
|---|---|---|
| 14. Equity in earnings/(losses) of affiliated companies | ||
| The detail of this caption as at December 31, 2022 and 2021 is as follows: | ||
| Euro | ||
| a) See Note 6 | ||
| 15. Supplies and external services | ||
| The detail of this caption as at December 31, 2022 and 2021 is as follows: | ||
| 2022 | Euro 2021 |
|
| Specialized work | 508,878 | 355,616 |
| Insurance | 298,982 | 285,144 |
| Travel Other |
18,051 153,533 |
4,948 153,410 |
Regarding the fees of the auditors, BDO & Associados, SROC, Lda., for the work for 2022, the amount was 38,100 euros, to which VAT is added to the legal rate.
The detail of this caption as at December 31, 2022 and 2021 is as follows:
| Euro | ||
|---|---|---|
| 2022 | 2021 | |
| Fixed and variable remuneration | 757,003 | 1,081,165 |
| Social security | 152,782 28,394 |
209,191 45,487 |
| Other | 938,178 | 1,335,843 |
| In 2022 and 2021, the average number of employees was 17 and 18 respectively. | ||
| In 2022, the reduction in the value of personnel costs is mainly due to the proposal of the Company's Social | ||
| Bodies to reduce their salaries by about 20%. | ||
| 17. Increases/(reductions) in fair value | ||
| This caption reflects the change in fair value of derivative financial instruments entered into by the | ||
| Company and has the following composition in the years ended December 31, 2022 and 2021: | ||
| Euro | ||
| 2022 | 2021 | |
| Losses on non-current assets held for sale | (310,426) (310,426) |
- - |
| Euro | |
|---|---|
| Euro | ||
|---|---|---|
| As of December 31, 2022, the investment portfolio started in August 2022 devaluation of 3.1% | ||
| corresponding to approximately 310,000 euros (Note 7). | ||
| Regarding Rio Forte's Debt Instruments and considering the maintenance of the main valuation factors of | ||
| its Assets, and, with no evolution in the amount of debts claimed, the expected recovery value of Rio Forte's | ||
| nominal debt in December 2022 remained unchanged at 5.79% equivalent to 51.9 million Euros. | ||
| 18. Net result per share | ||
| The net result per share for the years 2022 and 2021 was calculated as follows: | ||
| Euro | ||
| 2022 | 2021 | |
| Loss from continuing operations | (2,509,260) | (2,355,645) |
| Net loss considered in the computation of the diluted earnings per share | (2,509,260) | (2,355,645) |
| Weighted average common shares outstanding in the period | 821,756,654 | 821,756,654 |
PHAROL, after being the dominant company in the consolidated tax base of the PT Group, is currently still in dispute over a series of tax assessments from the years prior to 2014. In May 2014, and given the
| business combination agreement entered into between PHAROL and Oi SA, all responsibilities inherent to these tax assessments were transferred to Oi's responsibility, with PHAROL being jointly and severally liable. |
||
|---|---|---|
| In this way, PHAROL currently has active Bank Guarantees (approximately 84.6 million Euros), Oi Guarantees (approximately 34.3 million Euros in a deposit into a guarantee account and a pledge contract on 644,019,090 common shares of Oi), and captive balances in balance to be able to deal with potential tax |
||
| settlements from these processes (approximately 15.5 million Euros). | ||
| On the other hand, on December 31, 2022 and 2021, the Other Current Liabilities item includes the amount | ||
| of tax authority reimbursements that may be used in potential settlements. | ||
| As of December 31, 2022 and 2021, the amount of Bank Guarantees has the following composition: | ||
| 2022 | Euro 2021 |
|
| Bank and other guarantees presented to the tax authorities | 84,617,476 | 84,617,476 |
| 84,617,476 | 84,617,476 |
The bank guarantees and other guarantees presented in favor of the tax authorities included 85 million euros as at 31 December 2022 and 2021, respectively, related to tax assessments received by PHAROL. The Company judicially challenged these assessments and, in accordance with Portuguese legislation, provided a guarantee, in order to avoid the initiation of an enforcement process which, in the absence of a guarantee or payment of the contested tax, would proceed until the attachment of sufficient assets to satisfy the tax paid. Portuguese law, although always allowing the challenge of taxes paid of its own motion by the tax administration, only suspends the enforcement process if the tax is paid or a guarantee is provided. The provision of guarantee thus avoids the payment of tax before the decision of the challenge or the attachment of assets in enforcement proceedings.
Part of the guarantees previously provided were canceled due to the length of time and forfeiture of the processes. Notwithstanding the expiry and consequent cancellation of part of the Guarantees, most of the tax proceedings remain in progress, with Oi still responsible for them and may amount to up to 390 million euros (according to the tax consultants, proceedings with a possible or probable risk of loss for PHAROL amount to approximately 36.1 million euros). Also within the scope of the agreements entered into, Oi is also obliged to replace the bank guarantees provided by PHAROL to the Tax Authority with guarantees provided by Oi. In cases in which this replacement is not possible, Oi undertakes to provide equivalent guarantees in favor of PHAROL.
As such, on December 31, 2020, a Pledge Agreement for Telemar Norte Leste shares was in force with a maximum amount up to the limit of potential existing liabilities.
Additionally, in January 2020, following the Private Transaction Instrument and Other Covenants, entered into between PHAROL and Oi, the latter, through PT Participações SGPS, SA, made a deposit in an escrow account in the amount of 34,340,803, 32 Euros, intended to guarantee PHAROL in case of eventual conviction in tax contingencies for which Oi is responsible.
In the course of 2021, and in view of the incorporation on May 3, 2021 of Telemar Norte Leste, Oi SA and Pharol, in order to maintain the counter-guarantees in force, reformulated the pledge agreement, which is now constituted on 644,019,090 common shares issued by Oi. If this amount is fully used in tax contingencies, Oi SA undertakes to reinforce the counter-guarantees in force.
The Company believes that the disclosure of the outstanding debts and transactions performed with its main shareholders, notably those with a qualified holding of more than 2% in PHAROL's share capital and with all the entities reported by these shareholders as being their related parties. The tables below present the balances as at December 31, 2022 and 2021, and the transactions that took place in the fiscal years ending December 31, 2022 and 2021, between the PHAROL Group and these entities identified as shareholders with qualified holdings and their related parties: 2022 2021 Novo Banco 6,166,831 4,600,481 2022 2021 Novo Banco 540 1,125 295 -
| Euro | ||
|---|---|---|
| Cash and bank deposits | ||
| Shareholder | ||
| 6,166,831 | 4,600,481 | |
| with qualified holdings and their related parties: | ||||
|---|---|---|---|---|
| Euro | ||||
| Cash and bank deposits | ||||
| Shareholder | ||||
| 6,166,831 | 4,600,481 | |||
| Euro | ||||
| Costs and | Net interest | Net interest | ||
| losses | income | Costs and losses | income | |
| Shareholder | ||||
| 540 | 1,125 | 295 | - | |
| 21. Events occurring after the balance date | ||||
| Oi's stock price evolution between December 31, 2022, and February 24, 2022, can be found below: |
||||
| Reverse Split 10:1 | ||||
| 31 dez 22 | 06 jan 23 | 24 fev 23 | ||
| Oi ON share price (Reais) | 0.17 | 1.60 | 2.01 | |
| Oi PN share price (Reais) | 0.51 | 5.30 | 3.96 | |
| Exchange rate Real/Euro | 5.6386 | 5.6034 | 5.4633 | |
| Oi ON share price (Euro) | 0.03 | 0.29 | 0.37 |
| Euro | ||||
|---|---|---|---|---|
| Cash and bank deposits | ||||
| Shareholder | ||||
| 6,166,831 | 4,600,481 | |||
| Euro | ||||
| Costs and | Net interest | Net interest | ||
| losses | income | Costs and losses | income | |
| Shareholder | ||||
| 540 | 1,125 | 295 | - | |
| 21. Events occurring after the balance date Oi's stock price evolution between December 31, 2022, and February 24, 2022, can be found below: |
||||
| 31 dez 22 | Reverse Split 10:1 06 jan 23 |
24 fev 23 | ||
| Oi ON share price (Reais) | 0.17 | 1.60 | 2.01 | |
| Oi PN share price (Reais) | 0.51 | 5.30 | 3.96 | |
| Exchange rate Real/Euro | 5.6386 | 5.6034 | 5.4633 | |
| Oi ON share price (Euro) | 0.03 | 0.29 | 0.37 |
As at December 31, 2022, qualified holdings represented 19.56% of PHAROL share capital, as follows:
| DATE OF INFORMATION |
ENTITIES | NO. OF SHARES |
% OF CAPITAL |
% OF VOTING RIGHTS |
|---|---|---|---|---|
| 31/05/2012 | Oi S.A. – Under Judicial Recover* | 89,651,205 | 10.00% | 10.00% |
| *Telemar Norte Leste S.A. was incorporated on May 3, 2021 into Oi S.A | ||||
| Total attributable | 89,651,205 | 10.00% | 10.00% | |
| 02/04/2018 | Novo Banco S.A. | 85,665,125 | 9.56% | 9.56% |
| Directly | 85,665,125 | |||
| Shares held by companies in a controlling or group relationship with Novo Banco, S.A. |
916 | |||
| Shares held by directors and members of the Corporate Bodies |
595 | |||
| Total attributable | 85,666,636 | 9.56% | 9.56% |
The fiscal council does not own any shares of PHAROL.
The managing-director Luís Maria Viana Palha da Silva is also member of the Board of Directors.
The Statutory Auditor does not own any shares of PHAROL.
11/Jan/2022 | Grupo Visabeira SGPS, SA informed that it sold on the stock exchange, a total of 780,000 shares, representing 0.0870% of the share capital and voting rights of PHAROL.
As a result of the sales, Grupo Visabeira SGPS, S.A. now holds 9,187,041 shares, representing 1.0248% of the share capital and voting rights of PHAROL. Also informed that the existing participations are considered attributable to Fernando Campos Nunes (NIF: 175776083).
REPORT AND OPINION OF THE FISCAL COUNCIL
Exercise 2022 (individual accounts)
Dear Shareholders of PHAROL, SGPS S.A.
In compliance with article 420(1) (g) of the Code of Commercial Companies, we are responsible, as members of the Fiscal Council of "PHAROL, SGPS S.A." (from now on "PHAROL"), issue the annual report on our supervisory action as well as give an opinion on the management report, the individual financial statements and the proposal for the application of results submitted by the Board of The Ministering for the year ended 31 December 202 2 and also our assessment of their legal certification of accounts and audit report issued by the audit firm.
In accordance with article 420(1) (g) of the Commercial Companies Code and article 8(1) (h) of the Rules of Procedure of the PHAROL Fiscal Council, this body submits the report on the supervisory action developed in fiscal year 2022.
iii) verification of the regularity of accounting records and the accuracy of individual reporting documents;
iv) Assessment of accounting policies and value criteria adopted by PHAROL as to their adequacy and consistency, which aim to ensure the presentation of a true and appropriate picture of the financial position and results;
It also took note ofthe results of the audit and external audit work on the individual financial statements for the year 2022, comprising the balance sheet, the increase of results, the increaseof changesin equity, the d emonstraction of cash flows and their attachments.
The statutory auditor and external auditor followed the process of preparing PHAROL's individual financial statements, having made known to the Fiscal Council its conclusions and its agreement on the documents prepared by the Board of Directors.
Through the additional R es to the Fiscal Council, the statutory auditor and external auditor communicated the relevant aspects of the work carried out and its conclusions.
The Fiscal Council took note of the legal certification of the accounts on the individual financial information for the financial year 2022, isit witha reservation and an emphasis , by the statutory auditor and external auditor, a document which deserves its agreement.
It is the understanding of the statutory auditor and external auditor that it consists of relevant audit matters:
In this area, audit procedures and tests considered relevant in the circumstances were developed.
Pursuant to and for the purposes of Article 29g(1)(c) of the Securities Code, each member of the Fiscal Council declares that, to the best of his knowledge:
On the basis of the above report, the steps taken as well as the conclusions contained inthe legal reviewof the accounts and audit report and the additional report to the supervisory body on individual financial information, and taking into account the information received from the Board of Directors, the services of PH AROL and the statutory auditor and external auditor, we express our agreement with the management report, the individual financial statements and the proposal to apply the individual net result for the financial year 2022, so we are of the opinion that nothing prevents its approval at the General Meeting.
Finally, the members of the Fiscal Council express to the Board of Directors, to the main responsible and other employees of PHAROL their recognition and gratitude for all the collaboration provided.
Lisbon, 2 March 2023
_________________________________________________ José Eduardo Fragoso Tavares de Bettencourt - President
_________________________________________________ Isabel Maria Beja Gonçalves New - Member
_________________________________________________ João Manuel Pisco de Castro - Vowel
STATUTORY AUDITORS' CERTIFICATION
AND AUDIT REPORT
STATUTORY AUDITOR'S CERTIFICATION AND AUDIT REPORT (Free transiation from a report originaHy issued in Portuguese language. In case of doubt the Portuguese version wiII always prevail)
We have audited the accompanying financial statements of Pharot, SGPS, SÃ (Pharol), which comprise the balance sheet as at December 31, 2022 (showing a total of 86 741 443 euro and a tota( net equity of 69 730 008 euro, including a net loss of 2 509 260 euro), the income statement, the statement of changes in equity and the statement of cash flows for the year then ended, and the notes to the financial statements, including a summary of significant accounting po(icies.
In our opinion, except for the possible effects of the matter described in the "Basis for qua(ified opinion" section of our report, the accompanying financial statements give a true and fair view, in ali material respects, of the financial position of Pharol, SGPS, SÁ as at December 31, 2022, and of its financial performance and its cash flows for the year then ended in accordance with Ãccounting and Financial Reporting Standards adopted in Portugal under the Portuguese Ãccounting System.
Ás mentioned in the Management Report and in notes 1 e), 2, 3.13 a) and 6 of the notes to the financial statements as at December 31, 2022, the Financial Investments -equity method of accounting include the indirect investment in Ci, SÁ, which, as a result of the saIes of shares carried out in 2022 and the negative evolution of their share price, amounts to 4 million euros as at 31 December 2022 (38,6 million euros as at 31 December 2021), valued at market price, determined based on the closing price of the respective shares, with the changes in fair value recognized in equity. The Independent auditors report on the individual and consolidated financial statements for the year ended December 31, 2021 of Ci, SÃ, dated May 4, 2022, included a "Material uncertainty reiated to the operational continuity" of Ci, SA. The review report of the new independent auditor, appointed in 2022, on the interim individual and consoLidated financial statements for the period ended September 30, 2022 of Ci, SÃ, dated November 9, 2022, shows the following paragraph of the Emphasis titled "Going concern": "We draw attention to Note 1 to the parent company and consoiidated interim accounting informa tion has been prepared on the assumption of the normal continuity of the Companys business, observing the foliowing main aspects: (1) compliance with the requirements, terms and conditions set forth in the Amended Judicial Reorganization Plan ("Amended PRJ"), as weil as compliance with the requirements set forth in Law No. 11,101/2005; (ii) the successful implementation of the Companys strategic pian; (iii) the conclusion of the saie of Mobile Assets and InfraCo Isoiated Productive Units (UPIs), which took place on April 20, 2022 and June 9,
2022, respectively; and (iv) the execution of the instrument of renegotiation and transaction signed with ANATEL. The measures provided for in the Judicial Reorganiza tion Plan aim to reverse the conditions that have been causing recurring losses to the Company, and the fact that the Company is in Judicial Reorganization, as well as the remaining uncertainties regarding the success in meeting the necessary requirements for the end of this process, indicate the existence of material uncertainty that may raise significant doubt as to the Companys ability to continue as a going concern." As discLosed in chapter 3 of the 2022 Conso[idated Report and Accounts of the Pharol Group, SGPS, SÃ: (1) on December 15, 2022, it was pronounced the decision decreeing the end of the Judicial Reorganization of Oi and its who[ly owned, direct and indirect subsidiaries; and (ii) on March 1, 2023, 01 submitted a new request for urgent Judicial Reorganization, to the respective Court. Up to the present date, the individual and consolidated financial statements for the year ended December 31, 2022 of Oi, SA, nor the corresponding independent auditor's report, are yet available, a situation that [imits the scope and depth of the audit. As presented in note 21 to the present financial statements, the [isted market price of the ordinary shares of Di, SÃ evolved from 0.17 reais (0.03 euros) as at December 31, 2022 to 2.01 reais (0.37 euros ) as at February 24, 2023 (considering reverse split 10:1).
We conducted our audit in accordance with International Standards on Auditing (ISAs) and further technicat and ethica[ standards and guide[ines as issued by Ordem dos Revisores Oficiais de Contas (the Portuguese Institute of Statutory Auditors). Our responsibilities under those standards are further described in the "Auditor's Responsibi[ities for the Audit of the Financial Statements" section below. We are independent of Pharol in accordance with the [aw and we have fulfit[ed other ethical requirements in accordance with the Ordem dos Revisores Oficiais de Contas code of ethics.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qua[ified opinion.
The chapter 4 of the Consolidated Annual Report 2022 and the notes 2, 3 and 7 to the present financial statements and note 21 to the conso[idated financial statements, disclose, on one hand, that the measurement of the debt securities issued by Rio Forte Investments, SÃ reflects the management's best estimate concerning the recoverab[e amount of those securities and, on the other hand, that Pharol was summoned by the curators of Espírito Santo InternationaL SÃ (ESI), in view of a possible cancetlation of Notes payments, made by ESI, during the month of January 2014. Pharol considers the probabiLity, based on the a[[eged facts, of being convicted under the subpoenaed terms, to be highly remote, being the judicial process yet to be started until the present date. Our opinion is not modified in respect of this matter.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Basis for Qualified Opinion section, we considered in the audit the following retevant matters:
| di K t at te ey au m rs |
S th is of df t yn es au re sp on se |
|||
|---|---|---|---|---|
| SÃ M in in of th d eb ri ti is ed t st t b R io F ln t te st ts ea su re m en ve m en e se cu es su y or ve m en , |
||||
| M ch 15 th de bt is ed At 30 20 ri tie b ar e se cu s su y , SÁ Ri Fo In (R io Fo ) rt st ts rte o e ve m en w er e , ed Ph ol fo llo in th rf of tu to re rn ar w g e pe or m an ce , th ch si ed Se be 8, nt ct pt e ex an ge co ra gn on em r be Oi 20 14 G d Ph ol tw ee n ro up a r an |
Th di in lv ed in he si th t nt e au re sp on se vo e sy s, , rf of th fo llo in ed pe or m an ce e w g pr oc ur es : l is of th in fo io A in th at t rt na ys e rm n pr es en e re po s d is ed b th Ri Fo ts rt an an no un ce m en su y e o e in lv to so en cy cu ra rs ; |
|||
| Ri Fo is de in ki rt tv ta o e un r so en cy an pr oc es s ng pl in Lu bo ith hi gh bl ic d ed ia ac e xe m ur g, w pu an m of ile Th is in is le ith in th st t nt pr ve m en re va w e of Ph ol fin ci al d th st at ts sc op e ar an em en an e tiv in lv si ifi t nt re sp ec e m ea su re m en vo es gn ca j u d ts ge m en R el ed di lo 2, d th N 3 7 at ot to sc su re s: es an e fin ci al d 21 N th t st at ts ot to pr es en an em en an e e ol id ed fin ci al at st at ts co ns an em en |
À l is of th ju d ad b th ts na ys e ge m en m e y e in de in in th bl t te nt m an ag em en rm g e re co ve ra e am ou of th de bt ri tie be 31 20 22 D at e se cu s ec em r ; , C irc ul iz io of th ba nk he th de bt at ar n e s w re e ri tie de si d; te se cu s ar e po ito rin M of ib le de lo is in fr ts on g po ss ve pm en ar g om an is ed b th in t of tv to an no un ce m en su y e so en cy cu ra rs SÁ íri E Sa In io l, to is ed in N be nt te at sp o rn na su ov em r 14 20 17 d th nd in b in th an e co rr es po g e su po en a , hi le iv ed in 20 19 m ea nw re ce ; C irc ul iz io of th la th ha nd le th at at ar n e w ye rs e in lv d al is d ai l of th so en cy pr oc es s an an ys an ap pr sa e tiv ab th ed fo t ct tc re sp ec e re sp on se ou e ex pe ou om e r Ph ol of th b iv ed fr ES I fe ed ar e su po en a re ce om re rr be fo re |
|||
| Ev al tio of th ab le of th fin ci al ua n e re as on ne ss e an |
||||
| M in tf li in |
' di lo st at ts em en sc su re s. |
|||
| of fi t tm tp ea su re m en v es en or o o s Á In 20 22 Ph ol ith bs ib ed ba nk in t ug us ar su cr w a g , tit fo in fo lio in fin ci al tw st t rt en y r o ve m en po s an ed b th ba nk in tit d ts at as se m an ag y g en y an pl ie d in io l de fin ed rd ith ap ac co an ce w pr ev us y ite ri d lim its is tin ai nl of of cr a an co ns g m y gr ou ps , bo nd d sh of Li d ni ts ste as se an ar es co m pa es Th fo tio nd im el rt at to es e po s co rr es po ap pr ox y 11 % of Ph ol SG PS SA D be at ts ar ec em r as se as , , 31 20 22 d d fa ir lu ith at an ar e m ea su re va e, w , , fa ir ri io iz ed in of it lo tu at va e va ns re co gn pr or ss (IF RS 9) Th id io of th is le fo at at te nt e co ns er n m r as re va r th di ia lit is ba d th of th t at e au se on e m er y e ts as se R ed D is cl d 17 of th N 3, 7 et at ot os ur es : es an e |
ci al ts n an as se Th di in lv ed in he si th t nt e au re sp on se vo e sy s, , rf of th fo llo in ed pe or m an ce e w g pr oc ur es : irc ul iz io C of th ba nk th th at at ar n e m an ag es e in fo lio st t rt ve m en po s; O bt ai ni d al in th Po rtf ol io M t ng an an ys g e an ag em en R D be 31 20 22 ts at ep or as ec em r ; , C fir io of pl ia at b th ba nk in tit on m n co m nc e y e g en y ith th ite ri d lim its io l de fin ed b w e cr a an pr ev us y y Ph ol ar ; V ifi tio of th ad fo of cL sif ic io te at er ca n e eq ua rm as n d of th is in be in in t st t, an m ea su re m en ve m en ar g d th is io of th ic ab le IF RS pt m m e pr ov ns e ap ; Su bs iv fo lid io b pl in of th ta nt te st at e s r va n, y sa m g, e fo lio lu io rt ba d th ei of fic ia l ts at po as se va n, se on r |
|||
| th fin ci al te to st at ts no s es e an em en |
io ot at qu ns ; Ev al tio of th ab le of th fin ci aL ua n e re as on ne ss e an ' di lo st at ts em en sc su re s. |
Management is responsible for:
The supervisory body is responsibte for overseeing Pharol's financial reporting process.
Our responsibility is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or to error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high leveI of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individua(ly or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professionat scepticism throughout the audit. We also:
(i) identify and assess the risks of material misstatement of the financial statements, whether due to fraud or to error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resutting from error, as fraud may involve coltusion, forgery, intentionaL omissions, misrepresentations, or the override of internal control;
Our responsibitity also includes the verification that the information contained in the management report is consistent with the financial statements, and the verification of the requirements as provided in numbers 4 and 5 of articte 451 .° of the Portuguese Companies' Code, as well as verification that the remuneration report has been presented.
Pursuant to article 451 •0, n.° 3, aI. (e) of the Portuguese Companies' Code, except for the possible effects of the matter described in the "Basis for qualified opinion" section of our report, it is our opinion that the management report was prepared in accordance with the applicable legaL and regulatory requirements and the information contained therein is consistent with the audited financial statements and, having regard to our knowledge and assessment over Pharol, we have not identified any material misstatements.
Complying with article 451 .o, n.° 4, of the Portuguese Companies' Code, in our opinion, the corporate governance report includes the information required to Pharol to provide under article 29.°-H of the Securities Code, and we have not identified material misstatements on the information provided therein in comptiance with paragraphs c), d), f), h), i) and 1) of n.° 1 of that article.
Complying with article 26-G, no. 6, of the Securities Code, we inform that Pharol has included in a separate chapter, in its corporate governance report, the information specified in paragraph 2 of that article
Pursuant to article 10.0 of the Regulation (EU) n.° 537/2014 of the European Parliament and of the Council, of 16 April 2014, in addition to the key audit matters mentioned above, we also report the following:
Management has confirmed to us that they are not aware of any fraud or suspicion of fraud having occurred that has a material effect on the financial statements. In planning and executing our audit in accordance with ISAs we maintained professional scepticism, and we designed audit procedures to respond to the possibility of material misstatement in the financial statements due to fraud. As a result of our work we have not identified any material misstatement on the financial statements due to fraud.
We confirm that our audit opinion issued is consistent with the additiona[ report that we prepared and de[ivered to the supervisory body of Pharol. on March 2, 2023.
Lisbon, March 2, 2023
Ana GabrieLa Barata de Almeida, (ROC n° 1366, registered at the CMVM under no. 20160976) as representative of BDO & Associados - SROC
Investor Relations Luís Sousa de Macedo Investor Relations Director Rua Gorgel do Amaral, nº4, CV Esqª 1250-119 Lisboa, Portugal Tel: +351 21 269 7698 Fax: +351 21 269 7949 E-mail: [email protected]
Shareholders, investors, analysts and other interested parties should send their requests for information and clarifications (annual, half year, and quarter reports, press releases, etc.).
All publications and communications, as well as information regarding the businesses performed by the Company, are available on PHAROL's Internet page, at the following address: www.pharol.pt
Rua Gorgel do Amaral, nº4, CV Esqª 1250-119 Lisboa, Portugal Tel: +351 21 269 7690 Registered With The Commercial Registry Office Of Lisbon Under No. 503 215 058
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.